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‘During the time period leading up to the attacks on the Victims, HSBC knowingly laundered billions of dollars for the Mexican cartels who committed the attacks, including the Sinaloa, Juárez, and Los Zetas Cartels, knowing or deliberately disregarding the fact that said funds would be used to support the Mexican cartels and their terrorist acts against Mexican and U.S. citizens.’

(from Zapata v HSBC Holdings)

In simplest terms, money laundering describes the ways in which money from criminal proceeds is integrated into the legitimate financial system so that any traces or connections to the crime in question are hidden.

Why should we care about this? Is it something we need to raise awareness about?

Money laundering happens at the intersection of so many different types of criminal activity – drug trafficking, terrorism and other organised crime – and of legitimate institutions that deal directly with money in one way or another, whether as banks, real estate agencies, law firms, accountants, etc. Awareness of money laundering is required at all levels of such organisations with the precise aim of protecting not just the relevant institutions themselves but also wider society. How so?

We thought looking at some of the real-life consequences and effects of money laundering might bring the importance of the topic more to light.

The Terrorist Connection

Let’s start sensationally: fighting money laundering is key to fighting terrorism!

The above is actually true, and as you might suspect, following the money trail with the intent of drying it up as quickly as possible, does more to fight terrorism than the tallest, biggest, highest, greatest wall out there (in fact, walls are pretty useless on these things but we will leave that for another day!).

Here’s Roberto Saviano, author of the award-winning ‘Gomorrah’ and on the run from the Neapolitan mafia as a result of exposing them, talking about these links:

As far as I can tell, there is no such thing as a terrorist group that is not financed through drug trafficking. There is no such thing as a terrorist group whose routes for moving weapons, soldiers and money are not shared with criminal organizations that have already secured those routes for drug trafficking (Saviano 2015).

This is certainly the case with ISIS, whose organisation is largely propped up by a variety of crimes that help keep its operations smoothly working (see UNSC Resolution 2199). The same methods used for protecting the financial system from criminal proceeds also work to protect it from terrorist influence and activity.

The Financial Accountability Issue

Equally relevant is the ‘small’ question of holding accountable those that might not be doing their utmost to catch criminal gains from merging with average citizens’ hard-earned money. A financial sector which notoriously eludes control has, rightly, been the subject matter of many a frustrated citizen having to suffer austerity, bail-ins, bail-outs, with increasingly uncertain socio-economic outlooks facing us all. It is fair that many citizens are concerned with how their bank deposits are administered and whether the financial institution they entrust with this is doing its utmost to prevent infiltration by financial proceeds of crime.

For example, look at the ongoing scandal of HSBC Bank’s reported role in laundering up to $900 million for drug traffickers as well as processing transactions for countries sanctioned by the US such as Cuba, Libya, Iran, Sudan and Myanmar/Burma (source: New York Times). The banking ‘behemoth’ has been dubbed ‘Too Big To Jail’, with continued reports of cover-ups of the real amounts owed to US taxpayers, of UK and US politicians desperately negotiating as low a settlement as they can on behalf of the Bank. The protracted debates over how much the Bank owes sometimes detract from key concerns over how its enabling of money laundering in the first place has affected real, ordinary people on the ground.

The View From the Ground

We get a rare glimpse into the tragedy of money laundering through cases such as that of Zapata v HSBC Holdings Plc, where the families of several US citizens, who were killed by Mexican drug cartels that were able to continue financing their operations by laundering money through HSBC, are suing the bank. The families’ suit argues that HSBC’s recklessness and disregard for money laundering regulations meant they provided significant support to the ‘drug cartels’ ability to acquire personnel, weapons, vehicles, communication devices and the raw material for drug production’ (source: Legal Cheek). This then resulted in the deaths of their family members.

The group of families is suing the bank claiming it is liable under the US Anti-Terrorism Act, basing this on precedents such as the 2014 suing of Arab Bank by US citizens for its alleged links to Hamas. Although a key question here is whether the Mexican drug cartels in question in the Zapata v HSBC Holdings Plc suit can be classified as ‘terrorists’, the issue of the bank’s lack of meaningful oversight over its branches’ open disregard for anti-money laundering regulation is damning.

The Serious Consequences of Money Laundering

Money laundering is no joke, and nor should regulatory compliance of the financial sector. In the case of HSBC, we saw brazen disregard for the law when drug dealers would sometimes ‘deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows’ of some of HSBC’s Mexican branches. This is something that should have been not just raising serious red flags, but just ringing alarm bells all over.

The regulatory infrastructure for fighting against such practices is there. We have previously looked here in some small detail at the ways in which a financial institution can bolster its anti-money laundering policies and how that can help it reputationally and otherwise in continuing to do its business. These are regulations and practices that are in place, and which need to continue being enforced if citizens are to have trust in the financial sector. Moreover, a wider understanding of the sometimes murky connections between the world of organised crime and areas of legitimate finance is also needed, to understand how banking, real estate, even sports, can be vulnerable to money laundering and how this can be fought.

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